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LegalGems
LegalGems, Attorney
Category: Estate Law
Satisfied Customers: 3299
Experience:  Private Practice; Elder Law Attorney; Estate Planning; Attorney Mentor
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my aunt lended us money with a promissary note, and a security

Resolved Question:

my aunt lended us money with a promissary note, and a security agreement using our home as the "security". we are current, but have fallen behind in the past. She has sent a letter stating foreclosure and accelerating the loan. she wants her money back in 25 days. can she do that?
Submitted: 1 year ago.
Category: Estate Law
Expert:  LegalGems replied 1 year ago.

LegalGems :

Hi; My goal is to provide you with great service - if you have any questions during our chat, please ask! I'll do my best to ensure your satisfaction! Does the promissory note itself have an acceleration clause?

Customer:

yes

LegalGems :

And does it specify within what time frame the acceleration needs to be exercised? If so, can you let me know what it provides?

Customer:

promissory note was from legal zoom, no time frame.

LegalGems :

OK. That is good. If the loan is current and there is no current default, then the lender "acquiesced" to the default, and the original terms of the loan would still be applicable. If there is another default and she chooses to accelerate, that would be possible to do so; but once a lender continues with the loan and allows it to remain in good standing (after the debtor caught up), then there is generally no basis for acceleration, unless this right is specifically reserved (i.e. within 90 days of default lender may choose to accelerate....)

LegalGems :

Here is a NC case (I know you are in SC but the concept still applies) that explains the idea behind acceleration clauses. http://www.aoc.state.nc.us/www/public/coa/opinions/1999/990121-1.htm.

Customer:

So, if she has accepted our latest payment, which brought us current, then she can't.I have not paid any late fees, because they have never asked for them.

LegalGems :

If you are current there would be no basis, unless the PN specifically states otherwise. Typically these documents from online services aren't as comprehensive as they should be, which in this situation sounds as if it benefited you.

Customer:

there is no morgage instrument, so would she have to just sue me for the funds?

Customer:

she sent a second email today, about recieving payment, but it not being "acceptable", and she will move forward with foreclosure. I am hoping she keep the monies. Then it all becomes moot.

LegalGems :

If you are current, there would be no basis for suit. For a PN, the suit would be limited to funds, as it is an unsecured loan.

Customer:

even though we executed a security agreement? with our home listed?

LegalGems :

Sorry; when you stated there was no mortgage instrument, I assumed that meant it was unsecured. If the house secured the PN, then the house would be the security and foreclosure would be permissible. However, if the PN is current, I don't see what she is suing on. (Typically once a loan is current, even after default, if the lender did not accelerate, they cannot accelerate once the loan is brought current, unless the instrument provides for this).

Customer:

no trust deed

LegalGems :

Right. But the PN is current, correct? And the acceleration clause did not reserve the right to accelerate once payments were current?

Customer:

doesn't she have to provide a statement, amounts due?

Customer:

we paid the monthlys that were due

LegalGems :

Yes, that is referred to as an accounting. But if the PN is currently up to date, there would be no outstanding amount due.

Customer:

well thats the pickle, she says we owe her more...but no amount given

LegalGems :

Then it wouldn't hurt to do an accounting based on your records, to show that you are in fact current.

Customer:

have

Customer:

twice

LegalGems :

With copies of the checks?

Customer:

yes

Customer:

shes batty

LegalGems :

You may have to hire a personal attorney to write a letter stating that you are current, and that any acceleration would be improper. Especially if she is not responding.

LegalGems :

to you,.

LegalGems :

As the above case indicated, foreclosure was not permitted in that situation.

Customer:

I think we are getting to the that point, thats why i inquired here.

Customer:

can individuals be held to the laws about foreclosure, used for the banks?

Customer:

ie, harassment, paperwork, accounting?

LegalGems :

It would depend on the exact wording of the statute. But generally any person foreclosing must follow the foreclosure rules. As for harassment, any creditor (i.e. individual, bank etc) is prohibited from harassing the debtor. And an accounting needs to be provided. A court would not permit a foreclosure without a proper accounting.

LegalGems :

Here, I found a SC case: http://www.sccourts.org/opinions/htmlfiles/coa/3455.htm.

LegalGems :

Can you hit reply so I can see what you are typing?

Customer:

I was reading that link.

LegalGems :

Oh sorry- it stated on my end that you were typing. This site sometimes does that.

Customer:

I read our PN default paragraph. I think I am screwed

LegalGems :

Oh no. What does it say?

Customer:

"Borrower shall be in default under this Note upon any of the following: (a) failing to timely pay any principal amount due after demand is made"

LegalGems :

But how long ago was the nonpayment?

Customer:

she is demanding the full principal due.

Customer:

i owed her feb mar and april, which i paid last week(3 payments).

LegalGems :

Did she make a demand before you actually paid it?

Customer:

I deposit it at a local bank

Customer:

then my dad, who is her partner, mails her a check drawn from that bank. She lives in Hawaii.

Customer:

letter was dated april 26th

LegalGems :

But according to the terms of the sentence, in order to declare a default, the lender had to first make a demand, and then the borrower had to fail to timely pay.

LegalGems :

there was no failure to pay. And apparently no demand.

Customer:

ok, your are correct.

Customer:

except her demand was for full amount of loan, not monthlys

LegalGems :

At this point, you are going to need to hire an attorney and have them detail all this in a letter. Your best bet would be to find a limited scope representation attorney, as they don't require a hefty retainer, but bill you only for a la carte services that are purchased.

LegalGems :

If the loan is current I don't understand her position.

Customer:

me either. Ok, I feel like we have covered it all. Thanks

LegalGems :

You are welcome. Good luck with this!

Customer:

Thanks.

LegalGems, Attorney
Category: Estate Law
Satisfied Customers: 3299
Experience: Private Practice; Elder Law Attorney; Estate Planning; Attorney Mentor
LegalGems and 8 other Estate Law Specialists are ready to help you

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